The yen was trading modestly firmer on Monday after the Democratic Party of Japan (DPJ) ousted the ruling Liberal Democratic Party in a landslide, so putting an end to election uncertainty.

Investors are now waiting to see exactly what policies the new government will follow and how it will differ from the old. DPJ officials have said they would respect the independence of the Bank of Japan and are unlikely to intervene to weaken the yen, maintaining Japan's five-year absence from currency markets.

The yen was quoted at 93.36 per dollar, compared to 93.56 in New York on Friday, and at 133.42 per euro from 133.80. The U.S. dollar was steady on a basket of currencies <.DXY>.

The reaction has been very muted as the differences between the party on policy are more of nuance than of substance, said Stephen Roberts, an economist at Nomura in Sydney.

The DPJ may favor the consumer more, which ultimately could be favorable for the economy, but that's a long-run thing.

Analysts say the DPJ's policies are unlikely to threaten the economy's gradual recovery from its worst recession in 60 years, since the party has given priority to reviving the economy over fixing state finances.

The party plans to fund spending plans by mostly cutting waste, although economists worry that their pledge not to raise sales taxes could inflate an already huge public debt.

Investors might be concerned about the potential for increased government spending if the DPJ chooses to expand bond issuance excessively, raising concerns about Japan's long-term fiscal stability, Geoffrey Yu of UBS wrote in a note.

On the other hand, if concerns over the U.S. dollar grow in the future, the market will be worried about the DPJ's policy in managing U.S. dollar denominated assets.

In the past DPJ comments have suggested that the party does not want Japan to acquire more U.S. dollar denominated bonds. In this scenario, the dollar will come under heavy pressure against the yen, Yu added.

For more on recent comments from leading Democratic Party members on areas of economic and financial policy click on [nT331528]

Elsewhere, the euro slipped to $1.4288 against the dollar, from $1.4300 late on Friday, and still capped by the month's $1.4445 high with support around $1.4220.

Investors were cautious ahead of a busy week for data and central bank meetings. The U.S. payrolls report on Friday is expected to show a drop of around 225,000, which would continue the improving trend in the labor market.

Auto sales figures on Tuesday should show a boost from the cash for clunkers program, while the ISM report is expected to show a move into growth at 50.5.

Central banks meeting this week include the Reserve Bank of Australia, the European Central Bank and Sweden, while the Group of 20 meet in London on September 4 to 5.

(Reporting by Wayne Cole and Anirban Nag; Editing by James Thornhill)

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